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How do you Create an Employee Handbook?

You have finally decided to write an employee handbook or to revise the one that has been laying around for years. But what policies should you include? And how do you guarantee that the manual will become a useful tool, and not your worst enemy?

Below is a list of seven important rules to follow when creating an employee handbook.

Rule One: Write Your Handbook as if it's a Contract

Write your handbook as carefully as you would write a contract with your most important customer. The purpose of a personnel handbook has changed over the years. At one time, handbooks appeared to be more "Madison Avenue marketing hype" than a useful collection of policies. These handbooks promised much, even if the employer had little intent to deliver. Then the courts began to enforce the employers' promises and handbooks were considered in a whole new light.

Rule Two: Reserve the Right to Modify Your Handbook

Always reserve the right to add to, delete from, and modify your employee handbook. As times change, so do business conditions and needs. An employer's practices may no longer work well when the employer has doubled or tripled in size. In a small, family-owned business, the owners may know every employee personally. But as that business grows, the familiarity disappears and the need for more defined policies increases.

Rule Three: Don't Repeat the Provisions of Benefits Described in Other Documents

Employees will receive employee benefits that are often described in other handbooks, manuals or summary plan descriptions. These benefits include health and disability coverage, retirement benefits, life insurance, and the like. When a personnel manual describes a benefit differently than is described in the benefits official document, the employer may be held to the representation in the personnel manual.

For example, many health policies begin coverage on the first of the month following the month in which the employee completes 90 days of service. However, many handbooks advise employees that health insurance coverage begins after 90 days of employment. What happens if an employee is injured or becomes ill after 90 days of employment, but before the first of the following month? Has the employer become self-insured for that illness or injury?

Rule Four: Allow for Flexibility to Handle New Situations

The situations an employer faces will vary considerably from situation to situation. Theft of a pencil is not the equivalent of embezzlement of $10,000. An employer is wise to leave room to exercise its discretion when handling employee discipline situations.

Rule Five: Reserve Management Discretion to Avoid Disruption of the Business

An employer also should reserve discretion when necessary for the management of the business. For example, although an employee may be eligible for a certain amount of vacation time, the scheduling of that vacation should not unduly disrupt the operations of the business. Accordingly, the employer should subject the scheduling of vacations to the needs of the business.

Rule Six: Include Policies Addressing Termination Procedures

One common situation in which when an employer's policies are challenged is when the employment relationship does not work out. Does the terminated employee receive accrued vacation time? What if an employee quits the day after a holiday? Does the employee still receive holiday pay? Carefully addressing termination in the handbook will answer the questions before they are needed.

Rule Seven: Don't Make Promises You're Not Prepared to Keep

Often, an employer will adopt policies which are statements of good intention, but are not always followed. A classic example is a promise to evaluate an employee's performance every year on the employee's seniority date. Reviews are often late because they become tied up in the review process. An employer is wise to review its promises in its personnel manual and covert "will" to "may" where appropriate. (E.g., "The Company may evaluate your performance on an annual basis.")


An employee handbook is a useful business tool. It can be important in defining the employer/employee relationship. It can give guidance to your employees as to what is expected from them, while outlining the company's obligations to the employee. When it's done right it provides legal protections to the employer, but also provides an effective employee recruiting and retention tool. Adhering to the above rules can make a world of difference in the preparation of your personnel handbook.

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